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The Left at the Crossroads

We are living in a time of a crisis of capitalism. The neoliberal mantra of ‘leave everything to the market’ is beginning to ring hollow, even among the elites. As they gather in Davos this week they are confronted by a profitability problem of the world economy that can be divided into three main parts.

Firstly, there is the problem of manufacturing overcapacity. Most simply, there are too many goods and not enough customers. In the thirty year period after the Second World War the US economy was the world’s engine and the US became the hegemonic power. It’s confrontation with the Soviet Bloc helped to build up the military/industrial complex that drove the economy to unseen heights. Ironically the Vietnam War contributed to a weakening of the US engine, and that along with the oil shocks and subsequent stagflation necessitated a change from the post-war template. The financialization of the economy revved the engine again but without really addressing the underlying weaknesses.

Secondly, as globalization became the watchword and more and more manufacturing left the core countries (the triad of the US/Canada, Europe and Japan [with Germany being a special case]), a labor surplus developed not unrelated to the manufacturing overcapacity previously mentioned. As more people were driven out of agriculture and metropolises became more and more gargantuan and the informal economy grew there was less need for traditional labor in what has been characterized as the formal economy. The rise of automation is contributing to this situation: the concept of a guaranteed basic income (or GBI) has now entered the discussion not only among those who count themselves as progressives but has also been taken up by the elites as a remedy for a sick economy, a potential tactic for reflation of the economy.

Thirdly, debt limits have come into play. Household debt in the core countries has risen exponentially over the last forty years. In the US, as we have seen the entrance by more women into the formal workplace largely due to the inability of the single wage earner to support a family, the tactics for increasing consumption have relied on placing a debt burden on the family. Credit cards were given out like candy at Halloween; people were urged to purchase homes and then take out first, second and even third mortgages to support an aggressive consumerist lifestyle that was not only fiscally unsustainable but also ecologically unsustainable. Add to that a cohort of the young entering the economy with mounds of student debt and the table has been set for disruption on a massive scale.

In short, it is hard to see how there can be sustainable long-term growth under capitalism: we are living in a deflationary period of what economists call “secular stagnation”.It is important to understand this in order to make sense of the political universe we inhabit and to devise goals to improve our lives and to create the tactics and strategies to achieve our goals.